Chariot’s oil miss hits HRT

Latin America’s worst-performing initial public offering in two years, is losing its appeal to potential partners for oil exploration in Namibia after a competitor’s well in the African nation failed to yield crude, Bloomberg reported yesterday.

The value of HRT’s Namibian exploration licenses, the only offshore areas held by the Rio de Janeiro-based oil startup, is falling after Chariot Oil & Gas Ltd. (CHAR) drilled a second dry hole, said Banco Itau BBA SA analysts Paula Kovarsky and Diego Mendes. Before the Namibia disappointment, the company expected to fetch US$460 million by selling a third of its exploration licenses, according to the Itau analysts. By Monday, HRT hadn’t provided an official target price for the Namibia assets.
“There’s no positive way to look at the results in Namibia for HRT,” TJ Conway, a research and advisory manager at New York-based Energy Intelligence Group, said in a telephone interview from Washington DC.
HRT chief executive officer Marcio Mello said in a conference call on Monday that Chariot’s failure to find commercial quantities of hydrocarbons in its Kabeljou well at the Nimrod prospect doesn’t affect HRT’s outlook and drilling plans for Africa.
HRT won’t sell a stake in Namibia if the price isn’t right, Wagner Peres, the head of HRT’s Namibia operations, said. HRT has enough cash on hand to cover operations until July 2014, Mello added.
He said Chariot’s dry well was over 100 kilometres away from HRT’s closest drilling prospect and the negative results don’t reduce the chances of success at HRT’s areas. HRT plans to drill its first well in early 2013, the company said yesterday in an e-mailed response to questions.
“Most of the companies we are negotiating with are not concerned about this result,” Mello said. “Our prospects are far away, completely independent.”
However, Chariot’s Kabeljou well was one of HRT’s “last hopes” this year for positive data, Emerson Leite, an analyst at Credit Suisse said in a research report on Monday. Credit Suisse cut HRT to the equivalent of hold from buy after Chariot announced the dry hole.
“We would now prefer to wait for the company to prove its geological thesis in either Solimoes and Namibia before getting exposure to the shares,” Leite said. – Bloomberg

---